By Stella Kirchner
Have you ever considered buying a Rødex Daitona for $3,500, or are you just wondering how Chrono24 Magazine could overlook such a serious spelling error? Or maybe you’re curious where you might get a Rolex Daytona for such a great deal. In fact, the name represents neither a typo nor a bargain, but rather a digital NFT watch available on the Open Sea platform.
You’ve likely already read about NFTs and their dramatic price fluctuations. But what you may not have noticed is that NFTs are becoming increasingly popular when it comes to security and the verification of ownership. Did you know, for instance, that even established luxury watch brands like Breitling or Bulgari rely on NFTs for their watches? In this article, Chrono24 Magazine explains how NFTs work and why we might soon see every watch buyer owning them.
NFTs: The box and papers of the future?
“We have always used beautifully designed and hand-signed papers for our watches,” says Xavier de Roquemaurel, CEO of watch brand Czapek. “But now we’re in the digital age and, therefore, also need digital certificates.” Even in 2022, watches with a box and papers tend to reach higher prices than those without physical proof of origin. On the one hand, this has to do with the information recorded on the papers; on the other, an original box and papers also help generate buyer confidence. It is precisely this same ownership and purchase price information that NFTs contain. But what distinguishes NFTs from conventional certificates and how secure are they really?
“NFT stands for non-fungible token. Dollar bills, for instance, are fungible (editor’s note: exchangeable). If you give me ten dollars, I can give you back another ten-dollar bill and the value stays the same. Non-fungibles, by contrast, are unique items, so you can’t simply replace them with a similar object,” explains Mathew Chittazhathu, CEO of the Swiss tech company Adresta. Chittazhathu is also the man who, along with his team, created NFTs for Czapek’s watches. NFTs can be compared to one-of-a-kind objects ranging “from artwork to a Michael Jordan autograph, the difference being that NFTs are not physical, but are stored digitally on the blockchain,” Chittazhathu clarifies. That means they are unique digital specimens.
The Security of Watch NFTs: Will blockchain replace the bank safe?
But why do you need a blockchain to digitally record information about the owner of a watch? A blockchain is the storage location for non-fungible tokens. This storage location, however, is unique in that the data are not located on a server, but rather “stored and verified on a network of computers in units, i.e., blocks,” Chittazhathu describes. You may already be familiar with the term from the field of cryptocurrencies, “but blockchain offers many more use cases than just cryptocurrencies,” the entrepreneur explains enthusiastically. Still, the use cases of currency and certification bear a number of similarities:
- Immutability of transactions: No one can falsely claim after the fact to be the owner of the money or the (watch) NFT.
- Complete documentation of transactions: Each transaction is available for public view and traceable by a personal identifier, also known as a key. This makes unmistakeably clear who is the owner and who is the buyer.
- Forgery protection: Data on the blockchain cannot be duplicated and are, therefore, unique and forgery-proof.
These benefits of forgery-proofing and traceability are precisely what many watch buyers also want. “A Czapek customer once had a watch stolen that had the names of his children integrated into the dial,” says head of Czapek de Roquemaurel. “He then discovered that this exact watch was advertised on Chrono24, and together with Chrono24 CEO Tim Stracke, we were able to catch the thief and return the watch to the customer. But this moment made clear to me that we need a different kind of certificate.” Had this watch been sold with an NFT, the customer would have been able to prove with this document and one simple click that he was the legitimate owner of the timepiece. “Customer safety should not depend on the goodwill of a CEO,” de Roquemaurel states emphatically. Several hundred NFTs have already been created and sold along with watches. “And more and more people are asking for them,” the CEO asserts.
Watch NFTs: An all-encompassing solution?
“What can’t an NFT do?” you may be asking yourself at this point in the article. “Like any other technology, of course, blockchain is not perfect,” admits Mathew Chittazhathu. “The complex verification of transactions requires a lot of electricity, which has negative environmental consequences,” the NFT entrepreneur says. He also cautions that “NFTs represent a snapshot in time.” More precisely, they represent the moment in which the token is created. Chittazhathu explains: “Of course, new parts may be added to the watch, for example, without those changes being recorded in the NFT.” Moreover, he adds, if the NFT and the watch are sold separately, the validity of the certificate will also decline. Ultimately, the decision regarding what happens to the watch and its NFT will always be up to the collector – just as collectors today have the option to sell the box and papers separately. “As a watch brand, however, we want to give our customers the best possible certification of the timepiece,” emphasizes Czapek’s CEO Xavier de Roquemaurel.
NFTs as Price Drivers: Will luxury watches become even more expensive?
The auction house Sotheby’s is evidently on the same page as Czapek when it comes to NFTs. At the beginning of the year, it auctioned off Gérald Genta’s original designs for the Audemars Piguet Royal Oak along with an NFT. The proud buyer of this lot bid around $593,000 – did the NFT play a role in this price? Jewelry and watch brand Bulgari has also begun to take advantage of the increasing popularity of NFTs by translating this technology into an aesthetic feature. We’re referring, of course, to the new Bulgari Octo Finissimo Ultra with its distinctive QR code in the middle of the dial. Rarely has the watch world seen such a perfect amalgam of digitization and design. Indeed, Bulgari hasn’t missed the opportunity to profit from this horological wonder: limited to ten pieces, the timepiece costs around $432,000. The fact that the brand has beaten Piaget in manufacturing the thinnest timepiece ever made seems almost an incidental detail. For comparison, a pre-owned Bulgari Octo Finissimo without an NFT can be found on Chrono24 for an average price of just under $11,000.
In light of such examples, the fear that watch NFTs will drive prices up even further in an increasingly inaccessible watch market doesn’t seem unfounded. “In the future, it’s also likely that NFTs will be resold independently of physical watches,” suspects NFT entrepreneur Chittazhathu. The NFT can have a value independent of its physical counterpart. “As a digital asset, these watch NFTs are also shareable, meaning multiple people can own one together.”
Something similar is already happening with “physical” certificates of authenticity such as the boxes for iconic watches. Currently, watch enthusiasts have to pay several hundred dollars on Chrono24 for a Rolex box with instructions. “With NFTs, we must not forget that hype isn’t always accompanied by strong fluctuations. So, there’s no guarantee that the value of watch NFTs will increase,” Mathew Chittazhathu notes.
Will box and papers soon be worthless?
“At some point, it will probably become normal to own a digital twin of your luxury watch,” Chittazhathu predicts, and this may also reduce fluctuations in value. De Roquemaurel shares this view, but also stresses the continued importance of physical certificates. “Watches are about tradition and also about the physical object. So, we definitely won’t be replacing papers, but rather adding NFTs,” clarifies the CEO of Czapek. Every watch buyer will, therefore, have the choice of whether or not to use their NFT.